How recent tax laws may affect you and your family

Danielle Braff

Monday

Jan 31, 2011 at 12:01 AMJan 31, 2011 at 5:24 PM

A look at some changes in the tax code.

Social clubs

Many retirees belong to charities, social clubs and other tax-exempt organizations, which have been thriving, according to a recent IRS bulletin. They hold $2.7 trillion in assets, which is an increase of 5 percent from the previous year, and they reported $1.4 trillion in revenue.

Estate taxes

According to President Barack Obama’s tax bill, estates valued at less than $5 million a person are exempt from taxes. Estates that exceed $5 million will be taxed at 35 percent. This comes after a lull in estate taxes — the federal estate tax expired at the end of 2009 and temporarily allowed heirs of the large estates to inherit the money tax-free.

More money

The tax bill that Obama signed into law ensuring the tax cuts introduced by President George W. Bush nearly 10 years ago will remain for at least two more years means that households earning $250,000 or more annually will still get tax cuts. Anyone will an income of $40,000 will save about $800 annually, while someone with a $70,000 income will save $1,400.

Medicare cuts

Under the health-care reform bill, the government payments to Medicare Advantage will be cut by $132 billion over the next decade. Medicare Advantage is a plan run by private insurers and is an alternative to the traditional Medicare plan. The reduction will be phased in over three years and will start in 2011.

Senior donations

The tax bill will continue the provision allowing seniors 70 1/2 or older to donate up to $100,000 to charity from their individual retirement accounts. While it isn’t tax-deductible, it won’t be included in their taxable income for the year. It’s especially good for seniors who don’t have a mortgage and don’t have many items to deduct from their tax bills.

Taxpayers

They filed a total of 143 million income tax returns in the tax year 2008, according to a new report released by the IRS. The adjusted gross income reported for Americans totaled $8.3 trillion, which is a 5 percent decrease from the previous year – the first drop in adjusted gross income in six years.

Average Joe

Taxpayers, on average, will save about $3,000 this year as a result of Obama’s tax package. Families will be saving more if they are married, have children, pay for childcare, pay for college, invest in securities, use mass transit and pay local sales taxes.

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